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OPINION JULY 2, 2001
Talkin' Smack: Back in Black
Will Corel's new strategy pay off?

by David Nagel
Executive Producer
[email protected]

Less than a year ago, Corel Corp. seemed on the verge of ruin. Its profits were non-existent; it had just splurged on the acquisition of a number of creative products from the company formerly known as Metacreations; and its directors had released a statement saying that the company would be out of money unless it could merge with Inprise/Borland, another software company. The merger never happened.

Wall Street and investors didn't take too kindly to the predicament. And users of Corel's software, as well as those whose favorite apps from Metacreations were now in the hands of a troubled, seemingly directionless company, were justifiably concerned. After all, for companies in trouble, the mode on Wall Street had been (and continues to be) the liquidation of products in favor of new business models that would stimulate interest in the stock, while leaving users out in the cold.

However, Corel's plan was different. The company announced that it would rededicate itself to its software, focus on customer support and, last, bring some discipline to its financial management.

That was six months ago. Since then, the company has reported two quarters of modest profit (versus staggering losses), received a bit of a cash infusion from Microsoft and, of course, released several new versions of its software, including, most recently, Bryce 5 for Mac and Windows and Essentials (a combination of CorelDraw 9 and Photo-Paint 9) for Windows.

Plus, in a statement released last week with its most recent financials, Corel said it plans to launch five new applications that will run under Mac OS X over the next six months. Said Derek Burney, president and CEO of Corel:

"Over the short-term, we are moving rapidly to increase revenues by becoming truly a 'customer-centric' organization, in which our guiding philosophy is to anticipate our customers' needs. With that in mind, we have exciting plans in the works for the upcoming quarters, including the launch of a full complement of creative products optimized for Mac OS X."

This includes the previously announced CorelDraw 10 Suite and Painter 7, the long-anticipated update to Painter, which is expected to be released in August.

All of this points to good news for Corel's customers and those who merged over to Corel vis a vis the Metacreations acquisitions. These include users of Painter, Bryce and KPT, who have proved quite fanatical about these pieces of software. Bryce and Painter users in particular stood to lose the most if Corel were to have gone under.

Corel's current financial situation is nothing that's going to set Wall Street abuzz. As Corel reported yesterday, over the last six months, they've made $2.8 million on revenues of $68.5 million. While the revenue figures are down (from $80.7 million in the same period last year), income is finally positive, and cash/cash equivalents are way up: $126.2 million versus $9.8 million at this time last year.

The company is looking forward to more positive news as well and keeping the focus on products and building new relationships with customers through increased marketing efforts, including working with Apple to offer Corel's software through the Apple Store. Products include KPT 6, Bryce, Painter and KnockOut.

"This is the second consecutive quarter that we have posted a profit—a significant achievement, especially given the current economic uncertainty," said John Blaine, chief financial officer at Corel, in a prepared statement. "We continue to improve Corel's financial position by managing our daily operations for long-term, sustainable growth, rather than short-term gains. Our ability to achieve these early profits is a testament to how much more efficiently we are running the business."

For more information, visit http://www.corel.com.

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Dave Nagel is the producer of Creative Mac and Digital Media Designer; host of several World Wide User Groups, including Synthetik Studio Artist, Adobe Photoshop, Adobe InDesign, Adobe LiveMotion, Creative Mac and Digital Media Designer; and executive producer of the Digital Media Net family of publications.

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